iPhone trade-in prices start to slip after iPhone 5 unveiling

35% of one firm's quotes are for last year's iPhone 4S, an indication of interest in the new model

Used iPhone values dropped as much as 8% at several trade-in firms after Apple announced the new iPhone 5 and cut prices for two older models yesterday.

In the last week, the price quoted by NextWorth for a used 16GB iPhone 4S fell by 8%, dropping to $273 today from $300 on Sept. 6.

Gazelle, one of NextWorth's rivals, said today it would pay $264 for the 16GB iPhone 4S, or 5% less than last week's quote of $277.

Both companies are part of an expanding industry that buys used devices, primarily smartphones but also tablets and video game consoles, from consumers, refurbishes the devices, then sells them online, often using eBay and Amazon, or to wholesalers who may ship them overseas.

Prices paid for the same iPhone 4S by other trade-in outlets also dropped, or in some cases held steady.

At Glyde.com, a company founded in 2009 by former eBay executives, today's recommended selling price was $347 for the same 16GB iPhone 4S, down 4% from $362 a week ago.

Apple, which purchases used iPhones as part of its Reuse and Recycling program, has kept its 16GB iPhone 4S appraisal steady at $285 for the last seven days.

eBay's Instant Sale website quoted the same $300 it did a week ago.

"We've seen a drop in [quote values] of between 5% and 10% across all iPhone models since the announcement," said Anthony Scarsella, chief gadget officer at Gazelle, referring to the iPhone 5 event Apple hosted Wednesday in San Francisco.

The decline was not unexpected: Prices paid by trade-in vendors have fallen after each previous iPhone or iPad launch event.

Apple unveiled the iPhone 5 yesterday, and announced price cuts for 2010's iPhone 4 and last year's iPhone 4S. Apple will continue to sell the last two iPhone generations: A 16GB iPhone 4S now costs $99, or a 50% reduction from Tuesday, while an 8GB iPhone 4 is free.

To close those deals, consumers must agree to a new two-year contract with a mobile carrier.

Also as expected, the number of people considering selling an older smartphone soared yesterday as Apple confirmed that the iPhone 5 has a larger 4-in. display, supports mobile carriers' faster LTE data networks, and is both lighter and slimmer than its predecessor.

Gazelle tracked a 75% increase in the number of quotes it offered yesterday compared to Tuesday. CExchange, an electronics trade-in firm that handles programs from 40 brick-and-mortar retailers, mobile carriers and online sources, including eBay's Instant Sale, Wal-Mart and Radio Shack, cited a 70% jump in appraisals yesterday.

According to Scarsella, this year's volume shows a much greater interest in the iPhone 5 than took place last year when Apple introduced the iPhone 4S. "Compared to last year, we generated half a million offers. That's 1,200% over the same day last year," Scarsella said. At one point on Wednesday, Gazelle was buying about 30 used iPhones per minute -- a pace of 1,800 per hour.

"It was crazy," said Scarsella.

Like others in the trade-in business, Scarsella has linked the quote volume increases to a much higher level of interest in purchasing the new iPhone 5 than shown prior to the iPhone 4S on-sale date in October 2011. He stuck to that reasoning today.

Thirty-five percent of the trade-in quotes produced on Wednesday by Gazelle were of various models of the iPhone 4S, which for U.S. consumers meant that they were expecting to pay as much as $849 for the new smartphone.

"Some of these are people who are willing to pay full price for the iPhone 5," Scarsella observed. Those consumers were hoping to use what they earn from the sale of their iPhone 4S to subsidize the full-price purchase of an iPhone 5.

Another possible trend gleaned from Gazelle's data, said Scarsella, was a move away from AT&T: 85% of the iPhone quotes generated yesterday were tied to that U.S. carrier.

The iPhone 5 is the first Apple smartphone to support LTE. In the U.S. Verizon has a huge lead over AT&T in the number of markets where it offers the faster data network.

"Maybe this shows that people are jumping ship from AT&T," said Scarsella.

While prices may continue to slide in the short term -- historically, prices have dropped 20% to 25% once the specifics are known of the next iPhone -- they will level off in the next 30 to 60 days, said Scarsella.

"The iPhone 4 and 4S are in high demand, especially the iPhone 4S," Scarsella said. Foreign markets are particularly eager to get their hands on those two models. There, carriers do not subsidize phone purchases, so consumers must pay full price, Instead of being locked into a contract, they buy pre-paid mobile minutes.

On Friday, shortly after midnight PT, Apple and the three iPhone carriers in the U.S. -- AT&T, Sprint and Verizon -- will begin taking pre-sales orders for the iPhone 5.

The reduced-price iPhone 4S and iPhone 4 are available now at $99 and for free, respectively, at Apple's website.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

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